If you’re thinking of getting a new mortgage in 2023, it’s important to know that some things have changed that will affect the cost of your mortgage. These changes are because of updates made to Loan Level Price Adjustments (LLPAs) by Fannie Mae and Freddie Mac, who guarantee most new mortgages.
The Future of Mortgage Costs in 2023
One big change is that it will now be cheaper to have a low credit score. Before, if your score was under 680, you would have to pay a fee equal to 2.75% of the loan balance. Now, if your score is 659 and you’re borrowing 75% of the home’s value, you’ll only have to pay a fee equal to 1.5% of the loan balance. That’s a difference of $3,750 in closing costs on a $300,000 loan.
It’s worth noting that these changes only apply to loans that are guaranteed by the agencies starting May 1st, 2023. This covers most loans in the US, but there are exceptions, such as FHA/VA loans, certain jumbo and specialty products, and non-conforming loans that are not guaranteed by the agencies.
So, what does this mean for potential homeowners in 2023? It’s crucial to be aware of the updates to LLPAs and how they will affect the cost of your mortgage. Additionally, having a good credit score before applying for a mortgage is essential, as this will have a direct impact on the fees and costs you will incur.
In short, the changes to LLPAs from Fannie Mae and Freddie Mac could mean higher costs for those with a low credit score when it comes to getting a mortgage. To avoid these extra fees and costs, it’s important to familiarize yourself with the changes and make sure your credit score is in top form. By doing so, you can increase your chances of securing the mortgage you need to purchase your desired home.
To learn more about what this means for you, contact one of our experienced professionals today! Our team is well-versed in the Chicago condo market and can help answer any questions you have on this topic and more.
